BMW flags profit goal under pressure on Trump trade wars
BMW flags profit goal under pressure on Trump trade wars BMW warned that trade tensions could drag on profits in the coming months, squeezed by power politics between China and the US.
The manufacturer said any higher tariffs could mean it will no longer meet a goal of making a profit at the same level of a year ago. A host of car companies – including top rival Daimler AG – have cut financial targets as global trade tensions escalate and raw material prices increase.
The luxury carmaker is “very closely” monitoring the trade situation and “if conditions deteriorate any further, we cannot rule out effects on our guidance,” which the company maintained despite a drop in second- quarter earnings, chief financial officer Nicolas Peter said on a call with reporters.
“BMW has a strong footprint in the US, China and Europe and is well positioned for these times with a lot of flexibility, especially in production.”
President Donald Trump underscored the danger on Wednesday, when he asked US trade officials to consider increasing tariffs on US$ 200 billion in Chinese goods, adding to trade tensions that have already raised import tariffs for US-made cars to 40 per cent.
The increased levy has been in effect since July 6 after – despite lowering import tariffs on cars from other nations – China slapped retaliatory duties on US car imports. BMW last year shipped more than 100,000 sport utility vehicles to China from its Spartanburg plant in South Carolina.
“It’s all about what’s happening at the macro-level outside the company’s control,” said Frank Biller, a Stuttgart-based analyst with Landesbank Baden-Wuerttemberg.
“BMW is shipping vehicles with strong margins from the US to China, and they’re hostage to the negative effect of the trade tensions.”
BMW, which has raised prices on US-China imports, has a number of options to offset the higher barriers to trade, including an existing assembly in Thailand that pieces together X5 SUVs from readymade kits, chief executive officer Harald Krueger said on the call. Assembling cars from so- called completely-knocked- down parts is a common option to circumvent duties on vehicle imports.
There are no plans to move certain models to different production locations for now, Krueger said.
Group profit before taxes will be at the same level as last year, BMW said, while reiterating automotive revenue and unit sales would gain slightly. — WP-Bloomberg
It’s all about what’s happening at the macrolevel outside the company’s control. Frank Biller, Landesbank Baden-Wuerttemberg analyst